Artificial intelligence: New Zealand needs to embrace AI …

OPINION: An AI tool, NZ Prosperity Live, nowcasts how the economy is performing daily.

We worry about what is going to happen, but we do not even know what is happening now. It was months before Stats NZ advised that the economy had dipped in the June quarter. It matters. Treasury, the Reserve Bank and politicians did not know at the time what was happening. As an Associate Finance Minister, I sat in meetings with officials trying to interpret an economy using data that were months out of date.

I acquired a reputation for accurate predictions. It was because as Minister of Railways, I received the weekly tonnage moved, which I found to be a good proxy for what was happening now. Ever since my time in Government, I have relied on freight movement. Businesses do not move freight unless they are selling, producing or building. Road User Charges tell us how far heavy and light vehicles are travelling.

Freight is real. It is the economy leaving tyre marks. We need to know what is happening now because it tells us the direction of travel. Forecasting matters, but we know forecasts are usually wrong. There are too many variables – and then there are shocks no model can anticipate. The world changes faster than the spreadsheets. But reliable, up-to-date data matter because they tell us whether things are improving or worsening.

We also need more than just economic numbers. GDP (gross domestic product) is not the whole story. Politicians have tried to replace it with “wellbeing”, but it is too woolly to be useful. A country is more than GDP – but if we are going to measure something broader, it still needs to be concrete. Can we find an indicator more accurate than freight – and one that captures more than GDP? Professor Christoph Schumacher from Massey University’s School of Economics and Finance believes we can.

For business, it means the ability to stay profitable, competitive, take care of staff and make a positive contribution to the community. For the country, he defines prosperity as a state where people and communities can flourish. Schumacher and his team have developed an artificial intelligence (AI) tool to nowcast prosperity, which is continuously updated using a mixture of official statistics and high-frequency data, gathered daily.

This is not a forecast. It is an estimate of what is happening right now, even though the official figures will not be published for months. New Zealand Prosperity Live tracks the prosperity of New Zealand’s major public companies. It uses five criteria: financial health, innovation, workforce wellbeing, market resilience and social and environmental performance. There is a practical reason for using listed companies: they publish detailed reports.

They also sit at the centre of the supply chain. When big firms expand, thousands of smaller businesses benefit. When big firms sneeze, small firms catch a cold. The second index tracks New Zealand’s prosperity. It uses eight dimensions: education, health, income, housing, employment, safety, social wellbeing and work-life balance. My father was an Anglican minister. He would have argued the spiritual dimension matters more than any of these.

But he would also have said spiritual judgment is for the last day. The site’s list works for daily nowcasting. The weight given to each dimension is inevitably subjective. The researchers appear to have leaned on international surveys to guide the weighting. That is not perfect – but it makes more sense than most government objectives, which too often are gesture politics. The result is a daily score for business prosperity.

A score close to 0 reflects the lowest level observed since 2015. A score close to 100 reflects the highest. The model also produces a score for New Zealand’s prosperity, measured against the range since 2007. National prosperity is 75.4. The site even shows daily movements: down 0.2 for business, up 0.3 for the country. Ignore the day-to-day flicker and look at the trend. This feels right. Business is recovering, but it has not yet flowed through to households.

And it explains the mood. No model, even one powered by AI, can capture the full complexity of a modern economy. But it is better than waiting months to discover what is happening. The model will become more accurate. The larger point is what it demonstrates: AI will revolutionise decision-making – not just in Wellington, but in business. Many companies have daily dashboards such as sales, but they do not have a reliable daily read on profitability.

I have encountered unexpected results in quarterly reports. The website is a proof of concept: AI can provide companies with a daily read on profitability. New Zealand Prosperity Live is removing the excuse “we did not know what was happening”. Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.

Summary

This report covers the latest developments in artificial intelligence. The information presented highlights key changes and updates that are relevant to those following this topic.

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